How Do I Protect My Business in a Divorce?

When divorce proceedings are issued, there are multiple complex factors to consider. One of the most complex is dealing with any business interests or a company that you or both spouses have. One of the most contentious issues when it comes to business interests in divorce settlements tends to be the value of any business.

This can be further complicated if a spouse running the business or working in the business is dishonest about their role in the business. Or if they’re not forthcoming with the value of the business or the value of the shares in the business.

During the divorce proceedings, business accounts and ownerships structures will need to be scrutinised to ensure a fair value is obtained of any business. Then this can be fairly reflected in a divorce financial settlement.

Business ownership and divorce

Business ownership structures can include:

Sole trader – the owner controls and owns the business assets and is personally liable for any business debts.

Partnership – this might be an informal partnership, with no written agreement, or a formal one.

Limited company – the business will be owned and/or operated by shareholders and can have complex operating structures.

Understanding the business ownership or company structure is a vital part of the financial settlement aspect of the divorce proceedings when dealing with business interests. The business ownership will determine who else has interests in the business and will help understand what involvement you and/or your ex-spouse have in the business.

What happens to a business in a divorce?

In most cases, businesses, their assets and their value are included within the matrimonial asset ‘pot’. The matrimonial assets are usually savings, property, pensions and investments, but also include business interests.

These matrimonial assets are then shared within the divorce financial settlement. The business forms part of this settlement even if one spouse has never been involved in the business.

There are some exceptions, and this depends on the circumstances. It may be possible for the courts to leave the business owner or company shares with the business or spouse, and compensate the other spouse with a larger share of the other assets and/or spousal maintenance.

Every case is different, and what happens to leave business interests unchanged can include:

– Offset alternative marital assets.

– Buying out your spouse.

– Providing spousal maintenance.

– Selling the company / business shares.

Typically, a divorce with business assets will result in the value of the business being shared after a marriage as part of a financial settlement.

Business valuation in divorce

It’s essential to value a business or company shares to understand how, if at all, the value of the business interest could be shared between a divorcing couple. The most common approach to valuing a business for divorce is for an independent accountant to be appointed.

The process might not be straightforward, especially if the business is privately owned.

Valuing a business or company shares might depend on its:

– Assets, such as property or stock.

– Revenue and profits, past, present and potential in the future.

– The business ownership structure.

Valuing a business can be complicated and costly. It’s advised to get expert legal advice when dealing with any business interests in a divorce.

Is a limited company protected from divorce?

Any business that you or your spouse have a financial interest in will need to be disclosed and taken into account in your divorce financial settlement. A limited company is no exception and shares in a limited company are not protected from divorce.

How do I protect my business in a divorce?

Whilst you cannot keep your business interests out of the divorce financial settlement, you can protect your business in a divorce in a few ways:

– Postnuptial or separation agreement which can ringfence business assets.

– Keep the company separate to the household finances.

– Sacrifice other assets as part of the overall divorce settlement – this is known as offsetting.

You may be able to leave business structures unaffected by divorce with alternative methods of settling finances.

What is a freezing order?

If you are concerned that your spouse is trying to devalue business assets, then you can apply for a freezing order. This is an injunction made by a court to prevent your spouse from modifying any terms of their assets.

– Assets that can be frozen include:

– Business assets.

– Bank accounts and savings.

– Private and public shares.

– Property (including land).

– Intangible property (such as goodwill in a business or intellectual property rights).

– Possessions, such as vehicles and jewellery.

The divorce solicitors at Howells have extensive experience in dealing with complex divorce matters involving high-value assets, business and pensions. Our family law team is one of the largest in the region, and we consistently receive amazing feedback and praise from other professionals and our past clients. The team are Resolution and Law Society accredited specialists and are ranked high on Review Solicitors where they have a rating of 4.9 out of 5 for their client care.

Our family law solicitors specialising in a range of areas, including divorce, divorce financial settlements, child custody and separation agreements. And the team offer a free 30-minute consultation for new clients to discuss your individual situation.

Request a call back below or call us on 0114 2235 807 to book your free consultation today.